It seems like every week there is another major corporation in the news involved in a business scandal. Unfortunately recently, Wells Fargo is one of those companies that have been both breaking the law and acting unethically towards its clients. This is one of those cases that will be talked about and used as an example of what not to do for years to come. So what is so different about this scandal?
The Wells Fargo scandal involved fake accounts set up by the bank using real customer money. The differentiating element of this case is how widespread the corruption was. Most ethical issues are by CEO's, department heads, or boards of directors who are greedy and trying to push short-term profitability; this scandal involved all the different levels of the organization.
As discussed in class, employees take on different roles based on what coworkers and superiors are doing in the organization. This was no little-known issue- lots of workers knew about it and continued as if nothing was wrong. The corrupt culture was that allowed by the corporate executives trickled down to the front-line staff.
From 2011 to mid-2016 -- but possibly going back to 2010 and even 2009 -- Wells employees created more than 1.5 million unauthorized deposit accounts and issued more than 500,000 unauthorized credit card applications. These accounts racked up $2.6 million in fees for the bank.
Since 2011, nearly 2 million phony accounts were set up by Wells Fargo employees. This is astonishing to me that for five years employees and executives were creating these accounts that caused their customers fees from accounts they themselves didn't authorize opening.
The Wells Fargo scandal involved fake accounts set up by the bank using real customer money. The differentiating element of this case is how widespread the corruption was. Most ethical issues are by CEO's, department heads, or boards of directors who are greedy and trying to push short-term profitability; this scandal involved all the different levels of the organization.
As discussed in class, employees take on different roles based on what coworkers and superiors are doing in the organization. This was no little-known issue- lots of workers knew about it and continued as if nothing was wrong. The corrupt culture was that allowed by the corporate executives trickled down to the front-line staff.
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The Widespread Infection
Thousands of employees engaged in creating various new bank and credit-card accounts for customers without their knowledge. This resulted in overdraft and other fees by customers who were unaware of these secret accounts with their name on them. Employees were encouraged to increase the average number of financial products customers held. How they reached these aggressive sales goals were not important. Numbers, not the tactics used to obtain these numbers were encouraged by management. Employees do what is praised and encouraged at work even unethical practices that go against their personal moral compasses.From 2011 to mid-2016 -- but possibly going back to 2010 and even 2009 -- Wells employees created more than 1.5 million unauthorized deposit accounts and issued more than 500,000 unauthorized credit card applications. These accounts racked up $2.6 million in fees for the bank.
Since 2011, nearly 2 million phony accounts were set up by Wells Fargo employees. This is astonishing to me that for five years employees and executives were creating these accounts that caused their customers fees from accounts they themselves didn't authorize opening.
"The quotas imposed by Wells Fargo on its employees are often not attainable because there simply are not enough customers who enter a branch on a daily basis for employees to meet their quotas through traditional means"
When the employees couldn't use "traditional" means they turned to more unconventional ways such as a practice called "pinning." Pinning is when a Wells Fargo banker would obtain a debit card number and personally set the pin (often to 0000) without customer authorization. The banker would then enroll a customer in online banking, for which the banker would receive sales credit for.
Sources:
http://fortune.com/2016/09/15/wells-fargo-scandal/
http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/
https://www.bloomberg.com/view/articles/2016-09-09/wells-fargo-opened-a-couple-million-fake-accounts
You mentioned that the bank racked up $2.6 million in fees for the bank. What is the bank's yearly revenue? I'm not sure what the number is off the top of my head, but $2.6 million seems like it'd be chump change for Wells Fargo. Why would the bank risk everything for such little payoff?
ReplyDeleteThat is a very good part to point out. I think the most confusing part of this entire case to me was the fact that Wells Fargo went through all this trouble to set up these fake accounts and deceive their customers and in the end it didn't create that much additional revenue. You are completely right for how large Wells Fargo is $2.6 million is not that much. The only reason i think of to why they would risk that much is that the bankers wanted to show that they were creating more accounts. I think the low level bankers were more focused on the number of products created per customer than the actual dollar amount created as a result of these fraudulent accounts.
DeleteIt is astonishing that employees on a lower level will never think twice about their own personal morals or ethics because they are worried about being replaced. This seems to be quite a sticky situation for the lower level employees. I wonder how they thought they were going to get away with this though. And how long was the scandal plotted before hand? If I had an overdraft or any additional spending, I would for sure be all over it and I’m sure others would too! Maybe at that level of top management, they did not think this was a bad thing. Uper management is often times skewed towards the profit side of business.
ReplyDeleteI wondered the same thing and I couldn't find how long this scandal was planned for. I think one of the most shocking element was how many employees agreed to create these fake accounts. What types of banks and corporate cultures in past jobs did these bankers have that they were okay with going along with the plan. I agree upper management is often time screwed towards the profit side - but the catch is- this scandal didn't even create that much additional revenue!
DeleteI'm very surprised it lasted - this seems like something many people would be issuing public complaints about and would get noticed faster than five years. Did this start with front-line bankers or more so in upper management? Do you think that affects who is willing to take part?
ReplyDeleteBased on my research this was started by the front-line bankers. I still don't know how they got that many people to agree to create these fake accounts! Upper level management initially said they didn't know it was going on but the fake emails were so obviously made up that if anyone even scanned the email list they would have realized it.
DeleteI think perhaps it may have affected by the fact that coworkers banded together to reach sales goals. I think they may have agreed because they all felt they were too pressured to reach the sales goals and perhaps they decided this is a way to resist.
This was so unexpected of Wells Fargo. I do agree that these types of scandals happen very often but with a prestigious company it was shocking. I can't believe that the employees went through with this and it lasted 5 years. Obviously, this came from the upper management who I'm sure were hungry for profit and did not view the ethical sides of things. Why do you think no one came out and talked about this within those 5 years?
ReplyDeleteThat is a very good question and I don't know if I have a definitive answer to why. It seems like with how many employees were involved one..at least one would at some point say enough is enough and blow the whistle. The only idea I have is perhaps fear of being fired or being retaliated against afterwards.
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